The Debt Ceiling: More Posturing from the Politicians

If Congress fails to raise the debt limit, the United States will default on its current loans and an international fiscal crisis will ensue.

The fact of the matter is that any country – whether it is Greece or the United States – that has to routinely borrow money to pay for interest on its current debt has set a course from which it cannot recover. The government is no different than you or me. If we have to routinely borrow money to pay the interest on our mortgage and credit card debt, we are living substantially beyond our means and that economic absurdity will inevitably lead to default. No responsible lending institution should lend money to an individual if it is to be used to pay interest on an existing debt. There is no difference between such an irresponsible act than lending money to people who cannot afford to pay it back. But then again, we watched the federal government force lending institutions into doing just that thus contributing to the economic meltdown as the resulting over inflated housing market collapsed.
It serves President Obama and the Congressional politicians interests to tie the debt ceiling and default together. For Obama and his Democrat colleagues, it permits them to continue to spend far in excess of our ability to pay.

For the Republicans, it provides a convenient excuse when they inevitably cave-in to the Democrat’s demands to spend more than they have. The Republicans have already signaled that they are prepared to do just that when Speaker John Boehner announced that Republicans would not allow the country to default on its debt. In January, the Wall Street Journal quoted Speaker Boehner:

“We’re going to have to deal with it as adults. Whether we like it or not, the federal government has obligations and we have obligations on our part.”
In other words, the Republicans can say that in the end they acted “responsibly.”

There are three things wrong with this.

First, as I noted above, the debt ceiling and default, while related, or not connected. Congress could easily refuse to raise the debt ceiling and NOT default on its current debt. The cash flow to the federal government is more than sufficient to pay the interest on the current debt. The Congress needs only to adopt a resolution giving first priority to servicing the existing debt. (For those of you forced to endure an education in the Portland Public Schools, a “first priority” means that the government pays the interest on the debt before it pays anything else.) The extraordinary advantage of doing this is that it then forces the government to make the cuts to the military and entitlement programs that are necessary to bring spending under control.

Using the threat of default on the national debt is much akin to the way Democrats in Oregon’s legislature deal with the K-12 education budget – they spend merrily on all of the other programs and then balance the budget on the backs of education. It permits them to wail loudly about how education will suffer if taxes are not raised.

Second, someone needs to give Speaker Boehner lessons on bargaining. You cannot give away your only strategic advantage before you sit down at the table. The Speaker has already lost one battle having done the same thing with the debate over the 2010-11 Congressional budget. When the Speaker announced that the Republicans would not shut down the government, the debate was over. The Democrats could continue to spend in excess of income and the Republicans would stand by “acting responsibly.” The result was that virtually no significant budget cuts were advanced and the $100 Billion reduction promised by the Republicans became a $47 Billion slight of hand.

Third, nobody expects the Democrats to act responsibly so why should the Republicans. The Democrats practice brinkmanship at every turn and continue to be rewarded. The Republicans need to take a page from the Democrats’ book. They need to say that they stand on principle. That they will not vote to further burden future generations. That they are tired of the entitlement mentality. That if the Democrats will not engage in meaningful reform then the government will shut down. That if the Democrats will not agree to ensure payment of interest on the existing national debt, then the government will default.

Let’s reiterate a series of responsible actions that Congress should undertake as a solution to the debt crises:

  1. Congress should refuse to raise the debt ceiling and, instead, adopt a resolution giving first priority to the payment of interest on the existing debt.
  2. Congress should amend Medicaid and the Emergency Medical Treatment and Active Labor (EMTALA) to exclude those illegally in the country.
  3. Congress should amend all remaining welfare programs to exclude those illegally in the country.
  4. Congress should remove subsidies to agricultural operations, oil and gas production, alternative energy production, and the myriad of other subsidies designed to pick the winners and losers in a competitive marketplace.
  5. Congress should raise the Social Security eligibility age by one year for those under 55, two years for those under 50, three years for those under 45, and four years for those under forty. Even at that point, the eligibility age will not have kept pace with the advancement in mortality rates in this country.
  6. Congress should restrict current and future payments under Social Security to amounts that reflect earnings on actual employer/employee contributions at a rate comparable to the S&P 500 over the same time and amortized over the life expectancy of the recipient at the time of eligibility.
  7. Congress should remove troops immediately from Iraq and Afghanistan – no more nation building – and limit active military engagements to incidents where the United States safety and security are threatened and only until that threat is neutralized. While we can provide encouragement and supplies (military and civilian) for those who seek independence and democracy, we cannot fight their wars of independence.
  8. Congress should eliminate the Department of Energy and its entire budget given that it has failed completely in its purpose – to provide energy independence for the country.
  9. Congress should eliminate the Education Department and provide block grants to the states based on advancement under national testing programs. It too has failed in its mission given the continuing decline in educational achievement by our students vs. those in other advanced societies.
  10. Congress should review and reduce financial participation in the United Nations and its various programs. The same can be said of the International Monetary Fund (IMF), the World Bank, and NATO. Our financial commitment should not exceed our proportional control.

Fundamental change is required to return to a healthy economy with robust job growth. The empty promises of President Obama have not resulted in either HOPE or beneficial CHANGE.


President Obama and the big spenders of both parties, accompanied by the major media, have cast the current debate over the debt ceiling in those terms. The problem is that while the debt ceiling and the payment of interest on the current loans are related, they most assuredly are not connected.

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Posted by at 05:00 | Posted in Economy, Leadership, President Obama | 146 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Debtboy

    I agree completely. This Boehner guy is a fool.
    What a sad sack loser.
    What a total buffoon.

    • conservativey speaking

      BUFFoons attend Potland’s nekid bike ride.  Slake another Sam Adams off your bawl, DemBebtboy!

  • WP

    “The trouble with practical jokes is that very often they get elected.”  ~Will Rogers

    Wiley Post:  I’d cut the emergency switch in time to keep “Debbie Wasserman Shultz” from making an exhibition of herself by standing on her

  • valley dude

    “The government is no different than you or me.”
    Way way wrong. It is very different. To start, like a corporation, a government is in effect immortal. It does not age, get sick or die. And most unlike you or me, a government can manage the money supply of the nation, including its own access to money. 

    Greece is in trouble because it joined a currency controlled by others, so it can no longer print or inflate or deflate its way out of debt. Unless the US joins the EU, we can choose how to manage our debt.

    If Congress plays Russian roullette with the debt ceiling, all bets are off. Better stock up on canned goods.

  • just doing the math

    When I read that there has been 1.3 trillion spent on the wars in Iraq and
    Afghanistan (120 billion on Afghanistan in the last year alone) in the last decade;
    plus the huge toll on the soldiars and their families, I think of all the nation building
    that could have occurred in this country with that money.

    We are in debt because of the wars. Screwing people out of their earned
    “entitlements” is just indicative of the bottom line thinking of our politicians.

    And with all the age discrimination that is so prevelant in the job market,
    until there is serious teeth put into the the anti discrimination laws, I say
    lower the age of retirement. Raising the retirement to eventually 71? is insane.
    Employers do not hire older folks.

    I seriously question such suggested cuts in social programs, when they come
    from those folks on the hill use to having the “creme de la creme” of benefits, while
    expecting the “Ordinary American” (as politicians like to call us) to get the “crap de
    la crap”. Just the “same ol same ol” of asking us to do what they themselves 
    would never do.

    • LC

      The fact of the matter is, the reason for our national debt does not rest on defense spending, but rather on our social spending.

      Currently, social spending is the largest part of federal budget, with Social Security and Medicare/Medicaid programs accounting for 41% of our spending, with another 14% on other social safety net programs.

      You know that you could scrap the entire defense department spending, including the money spent on the wars, and it would still not cover the national deficit created by this year’s budget alone?

      • valley dude

        No LC, that isn’t the fact of the matter. The fact of the matter is we had a balanced budget several years in a row before George Bush was sort of elected, then cut taxes, engaged us in 2 very expensive, long wars we are still extricating ourselves from, and on his way out the door (with his banker friends) blew up the financial system of the nation, which necessitated expensive bailouts and increased social spending.

        And the very sad fact is that those who brought us this mess learned nothing, so want to get back in charge so they can do it all over again.  

        • LC

          Speaking of facts, it would be nice of you to actually provide some, which you conviently haven’t.

          Here’s some “facts” for you via

          1. In 2010, some 20 percent of the budget, or $705 billion, paid for defense and security-related international activities. The bulk of the spending in this category reflects the underlying costs of the Department of Defense and other security-related activities. The total also includes the cost of supporting operations in Iraq and Afghanistan, which totaled $170 billion in 2010.

          2. Another 20 percent of the budget, or $707 billion, paid for Social Security, which provided retirement benefits averaging $1,175 per month to 34.6 million retired workers in December 2010. Social Security also provided benefits to 2.9 million spouses and children of retired workers, 6.4 million surviving children and spouses of deceased workers, and 10.2 million disabled workers and their eligible dependents in December 2010.

          3. Three health insurance programs — Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) — together accounted for 21 percent of the budget in 2010, or $732 billion. Nearly two-thirds of this amount, or $452 billion, went to Medicare, which provides health coverage to around 47 million people who are over the age of 65 or have disabilities. The remainder of this category funds Medicaid and CHIP, which in a typical month in 2010 will provide health care or long-term care to about 60 million low-income children, parents, elderly people, and people with disabilities. Both Medicaid and CHIP require matching payments from the states.

          4. About 14 percent of the federal budget in 2010, or $496 billion, went to support programs that provide aid (other than health insurance or Social Security benefits) to individuals and families facing hardship. And, it was under Obama, not GWB, due to the failed stimulus plan, that caused the National Deficit to soar. Here’s a simple picture that illustrates this.

          • valley dude

            Well, the fact remains as I stated it. We had a balanced budget prior to Bush being elected, cutting taxes, getting us into wars he couldn’t get us out of, and then blowing up the economy. FY 2009, which was Bush’s last budget year, had a projected deficit of $1.4 trillion.  Obama  added to that, no question, but through emergency spending and multiple tax cuts intended to stimulate a sinking economy. Last December, at the insistence of Republicans, Obama agreed to extend the Bush tax cuts by 2 years. This alone added about 550 billion to the projected deficits.  So the same people now crying deficits insisted on policies that add to them.

            Our current deficit is mostly the result of the economic collapse. Our projected deficits (10 years out) are caused by, in no particular order: an aging population that will be eligible for SSI and Medicare & Medicaid, a baseline defense budget that has doubled since 2000 in real dollars, and multiple tax cuts. For the math challenged, the short term deficits cannot be closed unless we are ok with radical spending cuts AND significant tax increases, since we are deficit spending 40% of the federal budget. Long term, the deficits can’t be closed by cuts to entitlements unless these are paired with tax increases and cuts to defense spending. Every economist with a functional calculator is telling us the same thing.

            Unless we toss about 25% of our aging population off the cliff (as my Spartan ancestors used to do) we will have big bills to pay. Can’t do it without increasing taxes.

          • 3H

            I am never going to Ecola State Park with you. 

          • 3H

            I am never going to Ecola State Park with you. 

          • just doing the math

            I have the horrible feeling, if certain political groups had their way, that is
            exactly what they would do with 25% of the aging population.

          • valley dude

            From the looks of the “tea party” they might have a hard time selecting which of them to shove first.

          • just doing the math

            Google is a wonderful thing. I guess we can stat our way to oblivion. We were on
            track to pay down debt.

            President Clinton’s Record on Fiscal
            Discipline: Between 1981 and 1992,
            the national debt held by the public quadrupled. The annual budget deficit grew
            to $290 billion in 1992, the largest ever, and was projected to grow to more
            than $455 billion by Fiscal Year (FY) 2000. As a result of the tough and
            sometimes unpopular choices made by President Clinton, and major deficit
            reduction legislation passed in 1993 and 1997, we have seen eight consecutive
            years of fiscal improvement for the first time in America’s history.

            Largest Surplus Ever: The
            surplus in FY 2000 is $237 billion—the third consecutive surplus and the
            largest surplus ever.
            Largest Three-Year Debt Pay-Down Ever: Between 1998-2000, the publicly held debt was
            reduced by $363 billion—the largest three-year pay-down in American
            history. Under Presidents Reagan and Bush, the debt held by the public
            quadrupled. Under the Clinton-Gore budget, we are on track to pay off the
            entire publicly held debt on a net basis by 2009.
            Lower Federal Government Spending: After increasing under the previous two
            administrations, federal government spending as a share of the economy has
            been cut from 22.2 percent in 1992 to 18 percent in 2000—the lowest level
            since 1966.
            Reduced Interest Payments on the Debt: In 1993, the net interest payments on the debt
            held by the public were projected to grow to $348 billion in FY 2000. In
            2000, interest payments on the debt were $125 billion lower than
            Americans Benefit from Reduced Debt: Because of fiscal discipline and deficit and debt
            reduction, it is estimated that a family with a home mortgage of $100,000
            might expect to save roughly $2,000 per year in mortgage payments, like a
            large tax cut.
            Double Digit Growth in Private Investment in Equipment and
            Software: Lower debt will help
            maintain strong economic growth and fuel private investments. With
            government no longer draining resources out of capital markets, private
            investment in equipment and software averaged 13.3 percent annual growth
            since 1993, compared to 4.7 percent during 1981 to 1992.

          • just doing the math

            I just wish this site had a preview feature.

          • wnd

            A little hmm-work for jdtm’s perusal: Harvard Political Review, Jan ’89

          • just doing the math

            Like I said, we can stat or fact our way into oblivion thru the wonders of
            Google. It just depends on what side of the political spectrum one resides.

          • valley person

            The Harvard Political Review 1989? Can you summarize its relevance for us?

          • conservativey speaking

            “F” you…if you cannot or refuse to connect the dots!  Frankly, VD, your haute’ air smells alot like a barnyard at Orwell’s amimated farm!

          • valley person

             I can’t connect the dots, and do not want to bother reading the entire Harvard review article on the elder Bush to try and figure out what dots you think you are connecting.  Maybe someone else has the inclination.

          • conservativey speaking

            VD, the gates are down, the lights are flashing, but your train doesn’t appear to be coming…even with Debbie Wasserman Schultz breathing hard in support of your pants.

          • valley person

            Whatever dude. 

          • just doing the math

            Whoa, looks like “just looking up the quotes” needs to be barred from this conservative site due to bad language.

        • Rob DeHarpport

          You are ignoring the reality of unfunded liabilities that are unrealistic, social security, medicare, medicaid, federal pensions etc. It’s time to grow up and quit blaming the last administration for problems that have been festering for decades. BOTH parties have contributed to this mess for generations. The solutions are available- and painful. Reality is what it is. To continue on the path of spending more that we take in, printing and borrowing money etc is just to prolong the obvious. If not now – when?????

          • valley dude

            Unfunded liabilities? First, nothing is funded in advance. America, like all nations is on a pay as you go basis with annual budgets. So called unfunded liabilities are nothing more than projected expenditures measured against projected income. Any unfunded liability can be funded if we choose to do so.

            I’ll quit blaming the last administration for our deficits when someone shows me why I should.

            True or false: The last administration inherited a balanced budget?
            True or false: The current administration inherited a $1.4 trillion deficit?

            We agree, both parties have participated in deficit spending. We agree solutions are available and painful. We appear to disagree that part of that pain is increasing taxes at least back to what they were when we actually had a balanced budget, which was not that long ago.

    • LC

      The fact of the matter is, the reason for our national debt does not rest on defense spending, but rather on our social spending.

      Currently, social spending is the largest part of federal budget, with Social Security and Medicare/Medicaid programs accounting for 41% of our spending, with another 14% on other social safety net programs.

      You know that you could scrap the entire defense department spending, including the money spent on the wars, and it would still not cover the national deficit created by this year’s budget alone?

    • just looking up quotes

      “Hasn’t Sheik Osama
      bin Laden told you that you will not dream of security before there is
      security in Palestine and before all the infidel armies withdraw from
      the land of Muhammed.” Ayman al-Zawahri quote

    • just looking up quotes

      “Hasn’t Sheik Osama
      bin Laden told you that you will not dream of security before there is
      security in Palestine and before all the infidel armies withdraw from
      the land of Muhammed.” Ayman al-Zawahri quote

  • Financeminister

    We must rein in our spending – of that much I am certain.

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